Jamison Properties Inc. is discovering what many others have long known: the rag trade can be a tough way to make a buck.

Two months into its acquisition of the California Market Center, tenants say that the Los Angeles real estate company has a lot to learn about running a design mart, although the landlord has quelled fears that the complex will be converted to condominiums amid the downtown residential real estate frenzy.

“Very tentative,” is how label representative Michael Gae, owner of the center’s Rep Et Trois, described the mood in the building upon Jamison’s entrance. “The tenants in this building have all the experience, the new management does not.”

The 3 million-square-foot building in the heart of the fashion district, the largest apparel and design showcase in Los Angeles, is 70 percent occupied, according to Jamison.

Tenants say that the next few months should prove decisive, as the center prepares for an important October event when designers sell their spring collections. At stake is whether new management can keep up with the Cooper Building, the New Mart and the Gerry Building in a fickle industry where buzz can sway lease decisions.

For its part, Jamison says it is committed to the apparel industry and has taken steps to make the center attractive to buyers, key clients of its tenants who purchase wares for retail stores.

“When we acquired the California Market Center we felt a deep sense of pride and a deeper sense of responsibility to keeping it an icon,” said John Kim, the center’s general manager and Jamison’s senior vice president for leasing. “We especially remain committed to the California Market Center as a long-term player.”

In Limbo


Jamison, which owns and manages 90 office and medical buildings, purchased the property last October for $135 million from Judah Hertz’s Hertz Investment, another real estate investment company. But escrow did not close until late April, causing some uneasiness given that Jamison did not have a track record of operating design marts. There were specific concerns that the new owner would convert the property into condominiums.

“It seemed a little bit threatening to a lot of the tenants,” said Liza Stewart, president of Liza Stewart Inc. on the center’s fifth floor.

Adding to the concern was Firestone Associates, the second-largest tenant in the building with 14,000 square feet, which could not work out a lease extension and left.

Marc Firestone, president of the gifts and bath products company, now called Firestone Marketing Group, said he thought he had a deal worked out with Hertz, but it was scrapped when Jamison took over.

Firestone said Jamison rejected the deal and significantly raised the rent, although he declined to state by how much. “The new owner gave us a proposal that wasn’t satisfactory. We asked for some allowances, we were met with a resounding, ‘No, we don’t do that,'” he said.

Firestone, who took over the business last year from his father Dick Firestone, opted to leave the center for a 5,500-square-foot space at the L.A. Mart and he believes others will follow.

Kim disagrees that the departure will spur an exodus, saying that much of the disagreement with Firestone stemmed from the center having had a leasing relationship with the father, not the son. “With his retirement, that was it,” he said.

Kim said the loss of Firestone hasn’t slowed the pace of leasing. He estimated that occupancy has increased slightly, with 13,000 square feet leased over the last two months, although it has not filled the Firestone space. “There exists a great amount of energy here,” said Kim.

Regardless, Firestone’s exit was a big hit to the building and didn’t help settle nerves, especially with other marts willing to pick off disgruntled tenants.

Not that there isn’t the usual ebb and flow at the other properties. The Gerry Building is on the market, and owner MJW Investments already is talking with a buyer. There are rumors there about a condo conversion, but Larry Hudson, director of leasing, maintained that Gerry would stay a design mart. That building is 72 percent occupied.

“We are very clear that it is not going to be turned into residential condominiums,” said Hudson, who acknowledged that the conversion rumors have put a damper on leasing.

Marketing the Market


Meanwhile, Jamison scored a success with its first industry event, the June apparel market that was held last month. “The traffic was up, and the business was positive,” said Gae.

Even so, the June event is not as important to the industry as the one in October. As the landlord, Jamison is responsible for marketing the events and attracting customers quite unlike the typical properties that Jamison handles, where it’s the tenants’ job to attract customers.

At the June event, Stewart said that her revenues jumped 45 compared to last year, but she attributed most of the increase to the healthy economy.

Don Reichman, a partner in Reichman Associates, which represents six apparel manufacturers, said Jamison has reached out to tenants and sought their advice as the company adjusts to managing the center. “I am waiting to see more of a specific plan, but now they are saying a lot of the right things that they are committed to the industry,” said Reichman, who is also vice president of the Center’s Advisory Council, a body that includes representatives from various industry sectors.

“We need to continue to brand and promote the California Market Center and are going to continue to talk about increasing buyer traffic,” he said.

Kim said Jamison is working out its long-term marketing plans while getting a feel for the building and its tenants. Already, Advisory Council members and Jamison did agree on one point changing the market dates.

Dates for the spring collection market were pushed up to late October from early November, a move most tenants agreed was necessary to avoid competition from New York events and make the center a destination for international buyers who need to fill orders earlier.